How it’s worked out
Each month the pot grows at the monthly equivalent of the yearly growth rate you type, then that month’s payment goes in. Without yearly raises that adds up to:
Pot = S × (1 + g)^n + C × (q^(12n) − 1) ÷ (q − 1), q = (1 + g)^(1/12)
S is what you have now, C the monthly payment, g the yearly growth rate and n the years to go. To show it in today’s money the pot is divided by (1 + inflation)^n. The income is the pot times the share you take out each year.
Worked example
Aged 35, retiring at 67, with 25,000 saved and 400 a month going in, growing at 5% a year: the pot reaches 488,768 (the formula above gives 488,768 too). With 2.5% inflation that is about 221,788 in today’s money. Taking 4% a year would give 19,551 a year, about 8,872 in today’s money.
| Start at age | Paid in | Pot at 67 | At 4% a year |
|---|---|---|---|
| 25 | 151,200 | 497,893 | 19,916 |
| 35 | 115,200 | 277,233 | 11,089 |
| 45 | 79,200 | 141,767 | 5,671 |
| 55 | 43,200 | 58,603 | 2,344 |
Each row saves 300 a month from nothing at 5% a year. Starting ten years earlier roughly doubles the pot, because the early payments have longest to grow.
How to read the result
- Your pot: what it could be at the age you retire, in the money of that time.
- In today’s money: the same pot after inflation, which is the better guide to what it will buy.
- Income: what taking that share each year would pay at first. Whether it lasts depends on how the investments do.
Common mistakes
- Using a high growth rate: after charges, a few per cent above inflation is a more cautious guess. Try several.
- Reading the future pot as if it were today’s money: turn on inflation to see what it’s really worth.
- Leaving out an employer’s payments: type everything that goes in each month.
How to use it
- Type your age now and the age you’d like to retire.
- Type what you have saved and everything that goes in each month, and whether you’ll raise it each year.
- Type a growth rate after charges and an inflation rate, and the share you’d take out each year.
Questions
How much will my pension pot be worth?
It depends on what goes in, for how long and how it grows. For example, 25,000 now and 400 a month from 35 to 67 at 5% a year grows to about 488,768.
What is the 4% rule?
A rule of thumb from US studies of past markets: taking 4% of the pot in the first year, then the same amount rising with inflation, lasted 30 years in most historical periods. It is a starting point, not a promise; the calculator lets you type any share.
Does it include the state pension or tax relief?
No. It covers only the money paid in and the growth you type, with no pension rules, tax relief or state pension for any country.
More calculators
Elsewhere on Yuzool
- Savings goal spreadsheet in Gridwork
See all 39 calculators. Everything runs in your browser; nothing you type is sent anywhere.